The big gamble

Form 1/2011

It’s been 60 years since the royalty
system become the standard in the design world. But is it a
sustainable form of compensation? And how does it affect the next
generation of designers and what they produce?

There’s a blizzard outside of
Stockholm’s Hotel Skeppsholmen, where the staff have started to
light candles in the lounge. A French carpet producer has flown to
Stockholm for the sole purpose of meeting the American designer who
sits in front of him. He wants to collaborate and has a suitcase
filled with samples.

“But before I decide, I want to know
how many of your bestselling carpets sold last year,” explains the
designer, who prefers to remain anonymous. “If I’m going to spend
time visiting the manufacturers in Nepal and creating a great
product, I need to know the carpets will be profitable.”

The carpet producer also requested his
name not be mentioned. But what was revealed over the course of the
evening at Skeppsholmen in February 2010 is not unusual: the year
before, the company sold only four of the most profitable carpets in
its catalogue. That’s in a collection of fifteen rugs – several
of which didn’t sell at all. In this particular agreement, the
designer only received a 3 percent commission for every carpet sold.
That’s it.

“For me, this type of collaboration
means that I have to work with several producers,” explains the
designer. “Which in the end means that I have to do more designs in
a shorter period of time And to be blunt, the result is an excess of
things that constantly demand our attention and affect our
environment.”

According to the designer, the royalty
system also negatively affects the artistic merit of the final
product: “That goal often goes by the wayside since I have to focus
on sales. Which makes the industry less artistically rich and
prevents diversity.”

Not everything about the royalty system
is negative, however. Having become the standard in Italy at the
beginning of the 50s – in order to help a staggering industry
regain its footing after WWII – the royalty system has both its
upsides and downsides. In principle, it means that a designer works
without payment to create a product for a company in order to later
receive percentage-based compensation for each unit sold.

The size of the royalty is dependent
upon the company and type of commission, but the standard is about 3
percent of the wholesale price, which in turn is about half of what
the item sells for in stores. A lamp with a retail price of SEK 1,500
($220) gives the designer around SEK 24 ($3,50) – before taxes.

The larger and more established the
company is, the smaller the royalty, since more of the products are
expected to sell. However, in really fortunate circumstances, a
bestseller can support a designer for several years. A good example
is Dutch designer Bertjan Pot’s incredibly successful Random Light
lamp, a project he did early in his career and one that currently
provides enough income to live on.

But if the product doesn’t generate
any interest at all, it means several months of work were all in
vain. In some cases, a product might not even be put into production
despite the fact that the designer was asked to submit proposals. How
are designers supposed to live on small and uncertain incomes –
without having some other job? And how are the thousands of designers
graduating each year able to work under such conditions?

“A designer should be able to make
five, six good products per year,” explains Italian designer Luca
Nichetto, who has designed the acclaimed and technically advanced
chair Robo Chair for Swedish manufacturer Offecct. “One of them
should sell well and make a lot of money. Another product should
generate a lot of media attention and create a lot of PR. I see these
as pure advertisement. The rest might lead to other collaborations,
or exhibitions and associated activities. I try to think like a
strategist.”

All of the hard work – and strategic
thinking – has paid off for Nichetto. He currently has 69 products
on the market. Many of them, like the Face chair for Kristalia, bring
in a lot of money each year.

“It takes awhile to get into the
system. And once you have, you need to learn how to differentiate
between the different projects – those that generate PR and those
that generate income. In general, I think that we designers should
dare to talk more about money, join together and make more demands,”
Nichetto says.

What types of demands do you have in
mind?

“If an exclusive bathroom producer
asks me to do a collection that only a few people will be able to
afford, I want a design fee of half a million Swedish krona ($75,000)
that will not come out of my royalties later on. We must become
better at negotiating such things and we should talk to each other
more,” Nichetto explains.

Many critics claim that the long-term
effects of the system harm the final product, since a lack of funding
at the beginning stages can determine how much time a designer can
afford to spend on creating something really good. Another factor is
that it can take a designer up to three years to receives royalties
from a product – about as long as it takes to go from the first
sketches to the final sales.

If you compare the design world with
the publishing or music industries, they’re more flexible when it
comes to an advance on royalties. Advances would provide designers
with several advantages – for instance, payment up front allows you
to spend more time on your work. It also reassures designers that the
manufacturer intends to produce and market the product.

Johan Lindau of Blå Station still
doesn’t think that companies should offer advances. “I don’t
think that advances add value, but are rather disadvantageous. It’s
like a lot of other things in life; if you taste the cake before it’s
yours, it won’t taste as good or be as exciting once it actually
belongs to you,” he explains.

Lindau sees only one drawback to the
royalty system: “The only negative I see with the system is that
the large companies quickly copy the products that sell well and
their cheap knockoffs obviously impact how much designers earns,
since fewer of their products sell. That wouldn’t be the case if
designers were paid by the hour,” he explains.

He beliees companies still make a
large investment. “Designers invest their time, but the company
pays all of the costs associated with the development process and the
marketing. It’s a mutual risk.”

Åke Jansson, managing director at
Lammhults, agrees. This year, the company is launching several new
products and has focused efforts on raising the brand's design
profile. The company’s new products include German designer Andreas
Störiko’s Volo, a technically advanced product that costs upwards
of SEK 3 million ($440,000) to create the machines to manufacture it.

“It’s a major investment for us,
and we don’t even know if a product is going to sell well. Last
year we introduced 10 new pieces of furniture, and half of them
didn’t even sell. We give every product three years to see if sales
take off, and if it doesn't we take it out of production. We focus on
high quality and an attention to detail. The latter makes our
products more difficult to copy, which gives the designers some
security, since they know that their products don’t have to compete
with cheap knockoffs. It secures their wages.”

Since the royalty system was
introduced, society has changed – to the advantage of the system.
Few young designers can expect a future tied to a single company,
even if there are still long-term collaborations, such as that
between Lammhults and Gunilla Allard, Vitra and the Bouroullec
brothers, and Moroso and Patricia Urquiola, which is preferable. But
for freelance designers, it’s not just about getting something into
production, but also ensuring that a company has a fantastic
distribution network. If they don’t manage to get the product into
stores, it’s not going to sell.

Moreover, the system is built so that
companies are transparent in reporting sales to designers. This might
seen obvious, but it isn’t always. Another negative aspect that is
often mentioned in this type of discussion is the gap between how
success is portrayed in the media, and the economic reality.
Sometimes it can be almost comical. Private drivers and champagne one
week – and calls from the collection agency the next. An example is
the Swedish-German designer Katrin Greiling’s daybed Bidoun, which
has received regular media coverage and last year was named Furniture
of the Year by Swedish interior design magazine Sköna Hem. The only
example of the sofa that exists in Sweden is at Asplunds showroom,
where it remains unsold.

As Kristian Byrge, one of the founders
of Danish manufacturer Muuto puts it: “It’s easier to create a
product that receives a lot of media coverage but doesn't sell than
one that both sells and generates press.”

He views the royalty system as
something incredibly positive. In his opinion, it makes the designer
and producer understand each other, since it comes down to one thing:
money talks. Suddenly, they both have a vested interest in a product
selling well.

“Both parties want as much as
possible out of every product, which means that the designer is more
open to suggestions that can improve a product's sales. You become a
team, during the product development and afterwards.”

Nevertheless, many designers have
started to explore other avenues. Creating unique objects and
exhibiting them in galleries has been a natural move for some when it
becomes difficult to find a producer. Others, like British designer
Tom Dixon, have spent their careers seeking out new production
methods.

In addition to launching new furniture
at last year’s Milan Furniture Fair, Dixon published a new book,
New Industry. In short, it discusses bypassing the traditional
producers and stepping into the role of manufacturer in a manner
similar to the music industry’s revolt against the record
companies. And he’s not alone – colleagues who have chosen the
same path include Piet Hein Eek, Stephen Burks, Marcel Wanders and
Jurgen Bey, as well as a number of younger designers. Maybe it’s
the way forward – the saviour of pluralism?

Muuto’s Byrge thinks the idea is
absurd: “Why don’t producers design products themselves since
they know exactly what is going to sell well? The answer is simple.
They do what they do best. There is a reason why one chooses to be a
designer rather than the head of a company. As I see it, we need each
other to achieve the best possible outcome.”

Swedish designer Fredrik Mattson
agrees. “It’s easy to forget that design requires interaction
between the designer and the producer. The producer often has a lot
of expertise in the areas where the designer needs help, and vice
versa,” he says.

Mattson believes the system has
positively impacted his work: “I think you can work more
passionately when you are not counting hours. The way I work today, I
might throw away an entire month if the result isn’t up to par.
That would be hard if I were keeping track of the time.”

Did the American designer and the
exclusive French carpet manufacturer ever work together? The Nepalese
carpets never saw the light of day. The anonymous designer decided to
place his bets on other projects. Several of them relatively
lucrative – others pure speculation.